The Run Begins: Deutsche Bank Hedge Fund Clients Withdraw Excess Cash

Deutsche Bank concerns just went to '11' as Bloomberg reports a number of funds that clear derivatives trades with Deutsche Bank AG have withdrawn some excess cash and positions held at the lender, a sign of counterparties’ mounting concerns about doing business with Europe’s largest investment bank.

While the vast majority of Deutsche Bank’s more than 200 derivatives-clearing clients have made no changes, some funds that use the bank’s prime brokerage service have moved part of their listed derivatives holdings to other firms this week, according to an internal bank document seen by Bloomberg News.

Millennium Partners, Capula Investment Management and Rokos Capital Management are among about 10 hedge funds that have cut their exposure, said a person familiar with the situation who declined to be identified talking about confidential client matters.

The hedge funds use Deutsche Bank to clear their listed derivatives transactions because they are not members of clearinghouses. Millennium, Capula and Rokos declined to comment when contacted by phone or e-mail.

Which explains why short-dated CDS is soaring.

“Our trading clients are amongst the world’s most sophisticated investors,” Michael Golden, a spokesman for Deutsche Bank, said in an e-mailed statement.

“We are confident that the vast majority of them have a full understanding of our stable financial position, the current macroeconomic environment, the litigation process in the U.S. and the progress we are making with our strategy.”

Clients review their exposure to counterparties to avoid situations like the 2008 collapse of Lehman Brothers Holdings Inc. and MF Global’s 2011 bankruptcy when hedge funds had billions of dollars of assets frozen until the resolution of lengthy legal proceedings.

As expected, Deutsche Bank stock in NY is sliding.

If the most sophisticated professionals in the world are withdrawing cash, why are German depositors leaving their life savings at risk... ahead of a long weekend in Germany (Monday is a bank holiday).

As a reminder, if the liquidity run forces DB to start unwinding or being forced to novate derivatives, it could get ugly.

Those who have cash parked at Deutsche Bank, and at last check there was about €566 billion, they may want to consider moving it for the time being to a safer bank.

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Earlier this morning, we reported that Europe is experiencing a sudden and acute dollar shortage, which we attributed to Deutsche Bank. It now appears this was accurate.Since Deutsche's recent highs, the short-end of the EUR-USD basis swap curve has collapsed:

Simplifying - this chart measures the degree of USD shortage
(willingness to spend money just to get USD now) across time - the lower
the level, the more desperate for USDs.

And no, it's not a quarter-end issue:

Still not sure... Then explain why European banks just increased
their demand for USDs from The ECB's 7-day lending facility by over
2000%...

As @Landonthomasjr notes, since 2009: DB shareholders put up 13.5 billion euros in equity. DB has paid 19.3 billion euro in bonuses. Perhaps they should have saved some of that cash eh?

Simply put - trust in the European Banking system is faltering, counterparty risk hedging is accelerating:

And liquidity concerns are exploding, ahead of Germany's bank holiday on Monday.

The fed has their excuse to not touch rates through year's end. They'll be happy with a small correction in markets to solidify their excuse, but if markets tank too much, they will be there to provide those necessary soothing words to move stawks up.

Deutsche Bank on verge of collapse and Government isn’t coming to help

That shows a complete lack of understanding of what's been going on the past 7 years. What exactly is QE, ZIRP and NIRP, which are ongoing? CB's have been doing everything they can to save them. MOAR is not going to do anything. DB doesn't need help, their net zero derivatives were designed to handle this. That last bit was sarcasm.

This is going to blow for the simple fact that DB is cooking the books. They think there may be several weeks of cash sitting in their electronics vaults when there is only days. Let this fire get burning!

This stock just becomes a bigger and bigger bargain! It can't be long now before the market sees this opportunity and starts panic buying, driving the price through the roof. The smart money is busy buying as the price falls, waiting for the inevitable bidding war that will develop after people realize how many undervalued assets are on DB's balance sheet, and the added advantage of being a systemically important financial institution. Either that or the ECB will give them emergency financing. It's a win for smart investors either way.

At zero you could own the whole place for the asking. Of course, you wouldn't want it at that point.

Like I said yesterday, BD had better start the rumor themselves that a bailout is coming (which will forcably oblige the German Govt to give them one) instead of trying to trying to deny there is a panic.

I was wondering why gold finished own today, then I saw this article. Of course gold is down, it looks like a systemically important bank might go down, so it makes total sense that gold would get slammed.

1) drag the bank officers out to the city square and publicly flog them in the least;

2) claw back any DB bank bonuses handed out the last 2 years; and,

3) force the other banks who have any relationship with DB to take a haircut by forcing them to ante up Billions in proportion to their relationship with DB.

Depositors, who had nothing to do with DB's risky investments, should not be held respsonible for these bankers' risky actions since they did not take part in the decision making AND did not take part in the rewards.

If the most sophisticated professionals in the world are withdrawing cash, why are German depositors leaving their life savings at risk... ahead of a long weekend in Germany (Monday is a bank holiday).

My last pay check was $9500 working 12 hours a week online. My sisters friend has been averaging 15k for months now and she works about 20 hours a week. I can't believe how easy it was once I tried it out. This is what I do... http://tiny.cc/2jncfy